These are some facts, but let’s dwell a little on the terminology. Of course everybody knows what an unmarried couple is, but let’s see what a domestic partnership is.

From a legal point of view, domestic partners are two unrelated, unmarried, committed adults in the same household who are interdependent emotionally and financially. The terminology for such unions is still evolving, as to the level of rights and responsibilities conferred by a domestic partnership, this varies widely from one legal jurisdiction to another. After all, the term “domestic partner” was first used in a court of law only in 1982:-) Although the term initially referred to same-sex partners, it is now commonly used for opposite-sex partners as well.

At present, an increasing number of states and municipal governments have enacted laws addressing the issue of domestic partner benefits, even some branches of the federal government are making these benefits available to their employees.

There are some municipalities which award benefits to domestic partners similar to those offered to spouses. Washington DC gives tax breaks to businesses that offer health insurance covering domestic partnerships. Seattle and some other cities allow domestic partners family discounts for facility and institutional membership and user fees. New York state includes domestic partners in family rent-control laws, and Oakland, California has removed the tax for property transfer between domestic partners

By comparison, a higher number of companies, individual businesses and organizations across the country extend domestic partner benefits to their employees or members.

The employer offering domestic partner benefits may require proof of the relationship, such as evidence of a civil union or domestic-partner registration (where available) or joint financial records, contracts or leases. Employers often require a waiting period of six months to a year to add a domestic partner to a benefit program and the employee may have to sign a sworn statement. Some employers are satisfied with the partners signing a written statement of their relationship.

There are domestic partner benefit plans which offer only minimal, low-cost benefits such as family leave, funeral leave, relocation expenses, use of employer facilities and inclusion in company functions.

Some domestic partner benefit plans include health insurance coverage, allowing domestic partners to access more affordable and comprehensive health care services.

Other flexible benefits allowances that include extra money or credits toward providing coverage for a domestic partner may also be included, however, all these benefits depend solely on the decision of the employer.

As far as taxation is concerned, the IRS offers tax-favored treatment only to legal spouses or legal dependents and no tax-favored treatment for unmarried couples or domestic partners.

Therefore, an employee whose partner receives domestic partner benefits must include the cost of those benefits as taxable income, unless the partner meets the IRS definition of a legal dependent or qualifies as a spouse under state law.

The tax is determined by assessing a fair market value for covering the domestic partner. This amount is then reported on the employee’s W-2 form and subjected to Social Security FICA and federal (and state) withholding taxes.

Domestic partners face many challenges regarding other aspects of their financial status as well, but with good financial and estate planning, most of the issues can be overcome.

As always we advise you to look for professional help and guidance.